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Can Changes to Medicare Reimbursement Appeals Reduce Backlog?

Several industry groups voiced concerns that proposed changes to the Medicare reimbursement appeals process would not decrease the pending appeals backlog.

August 31, 2016 - The lengthy Medicare reimbursement appeals process poses significant revenue cycle management problems for many providers, yet new proposed fixes from HHS may not do much to solve the problem, argue several industry groups.

In June, HHS proposed to increase the number of available claims adjudicators, promote consistency in decision making across the appeals process, and streamline procedures to avoid repetition and wasted efforts.

The proposal was designed to alleviate the significant backlog of dispute claims currently in the system. HHS reported that there were 898,891 pending appeals at the OMHA and the Medicare Appeals Council, which would take about 11 years for the OMHA and six years for the Council to process.

However, many industry groups have used the public comment period to voice their concerns regarding the administrative changes, particularly how the proposal would not significantly reduce the claims appeals backlog and streamline the process.

The American Hospital Association stated that the revisions to the process would “do little more than scratch the surface of the problem.”

“The most recent statistics released by OMHA show that the average appeals processing time was 935.4 days in the third quarter of fiscal year (FY) 2016 – an increase of 75 days from the prior quarter and 140 days since the beginning of the fiscal year,” the AHA wrote in a letter to HHS. “This is movement in the wrong direction, and it is clear that merely tweaking the appeals system will not adequately address the problem.”

HHS should address the role of the Recovery Audit Contractors (RACs), who review reimbursements for overpayments, in the growing appeals workload and backlog, the AHA added. The group argues that RACs have increased inappropriate claim denials. Providers must then pay back the related Medicare reimbursements before they can begin an appeal process to recoup the funds.

A June study from the AHA found that 60 percent of claims review by the Recovery Audit Contractors in the first quarter of 2016 did not contain an overpayment despite being flagged as an improper payment. As a result of inappropriate claim denials, hospitals in the study reported that they appealed almost half of all claim denials.

The AHA advised the OMHA to share relevant data with HHS and other healthcare stakeholders to show how RAC denials have increased workload burdens and contributed to the Medicare appeals backlog.

The American Medical Association (AMA) agreed with the AHA, stating that the proposal is “treating the symptoms rather than the disease.” In its comment letter, the AMA stated that HHS should work to resolve issues with Recovery Audit Contractors rather than the OMHA.

The group recommended that HHS impose stricter financial penalties on contractors for inaccurate audit findings, pay providers with interest for wins on appeals, provide longer periods for physicians to rebill for recouped claims, and allow providers of the same specialty who are licensed in the same jurisdiction to complete audit evaluations.

HHS’ proposed methods for streamlining the appeals process may also create barriers for providers to dispute claim denials, the AMA added. For example, the proposed rule stated that the Medicare allowable amount, rather than the billed charges, would be used to calculate the amount in question, but that change would shut down access to the Administrative Law Judge level for many providers.

“Appeals are not cheap and require significant resources, time, and expense,” the AMA wrote. “Certain proposed fixes, such as designating some Medicare Appeals Council decisions as precedential, may actually increase these costs by requiring the advice of counsel earlier in the process and by leading Medicare contractors to misread and misapply what the precedent stands for.”

The Federation of American Hospitals also advised HHS to offer an appeals settlement deal to hospitals if they agree to withdraw all pending disputes. The FAH stated in a comment letter that a settlement is “necessary to address the appeals backlog in a meaningful manner.”

CMS recently released data on a $1.47 billion settlement deal it offered to hospitals in 2014 to settle pending inpatient claims disputes. Over 2,000 hospitals accepted the deal to resolve approximately 346,000 claims that were stuck in the appeals process. CMS paid hospitals 68 percent of the net allowable amount of disputed claims.

The FAH also questioned if allowing precedential decision by the Departmental Appeals Board would reduce the backlog of disputed claims. It argued that precedential decisions may actually incentivize providers to appeal cases that apply to that decision, causing more appeals to add to the growing backlog.

Precedential decisions may promote consistency, the industry group added, but it could also lead to more inappropriate or legally unsound decisions to become precedent. Inappropriate precedents could cause providers to “pursue subsequent appeals through each step of the appeals process, and ultimately in federal court.”

“[T]he FAH urges that the final rule require the DAB [Departmental Appeals Board] Chair to permit providers to offer input into which cases should be designated as precedential in order to mitigate these concerns and the effect of inappropriate or unfair precedential decisions,” the letter stated.

Many healthcare stakeholders have urged HHS further propose measures to improve the Medicare reimbursement appeals process, especially at the contractor level. Now that the comment period has closed, HHS will review the submissions and begin to finalize any additional changes to the appeals process.